Economic data in the Euro-Zone has started to steady in recent weeks, though remains in a rut. The Citi Economic Surprise Index has eased back towards the yearly low set on July 21 of -43.3, and is currently -31.6.

Yet even as the European Central Bank meets on today for their August policy meeting, it is unlikely that an optimistic tone regarding the region’s growth prospects is sounded too loudly: inflation stubbornly remains on a downward trajectory.

Soft inflation expectations are dogging the Euro in the near-term, with the July Euro-Zone CPI Estimate reported at only +0.4% y/y on Wednesday.

Given the state of affairs in the region it is likely that the ECB meeting this week offers no clear path forward. The ECB meeting today, then, absent of any real action, will at least bring along with it a rather dovish slant from Governor Mario Draghi at the post-meeting press conference. The specter of QE will be fleshed out, but without any specific details that would indicate QE is due in the immediate future.

A lack of heightened dovishness will probably provoke a short-term squeeze in the Euro, where non-commercials/speculators have increased net-short positions (108K contracts) to their highest levels since the week ended August 21, 2012 (124K contracts).

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